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Aghanenu: FG has rendered local content policy ineffective

The President, Association of Chandlers and Ship Suppliers of Nigeria (ACSSN), Mr Osai Aghanenu, in this interview with BAYO AKOMOLAFE, speaks on Federal Government’s jettisoning of local content policy and other critical issues in maritime, as well as oil and gas sectors

 

What is currently the state of insecurity on Nigerian waters?

Water insecurity has been posing threat to the local economy and has undermined the peace and stability in the country, most especially in the Niger-Delta area.

 

At the moment, Nigeria is experiencing high rate of criminality in her waters, including kidnapping, smuggling, human and drug trafficking, sea robbery, crude oil theft and bunkering, among others. Presently, the marine insurers are treating our country as a war zone.

The only reason why ship owners still allow their vessels to come to our ports is due to the huge profits they are making. For some years now, there has been increase in insurance premiums for the international shipping lines calling at our ports.

 

This has led to reduction in employment and business opportunities in the maritime industry. Apart from the effect of coronavirus, our revenue from shipping trade has tumbled. Also, the negative international media coverage has not been fair to the country in terms of sustaining business investments.

 

For example, because of militant attacks on oil installation and pipeline vandalism, most of the oil and gas companies have closed down or relocated their offices from the area, leaving the region in massive economic quagmire.

 

The country has been unable to meet its oil production quota, unemployment has skyrocketed, oil export nosedived, foreign exchange dropped and the cost of doing business in the area has increased. My fear is that some of the major oil companies are contemplating shutting down their onshore operations and relocating offshore operations.

 

The implication is huge when you consider the low level of investment and the dwindling internally generated revenue, among others.

 

Also, from the Niger Delta Annual Conflict report, there were incidents and episodes that resulted to the deaths of over 546 in 2018 and 1,000 people in 2019. Presently, insecurity has undermined the socio-economic development of the region because of fear and threat to lives.

 

How has the local content policy helped to develop the shipping sector, especially ship chandelling?

 

The Federal Government, in its effort to harness the potential of ship chandelling service in the maritime industry, took a bold step to change the face of maritime in the  upstream sector by enacting the Nigeria Oil and Gas Industry Content Development Act 2010. The Act clearly reserves 90 per cent of ship chandelling service in the oil and gas industry to indigenous companies.

 

 

The key aim of the government policy was to implement a viable and sustainable Nigerian content development policy that emphasises quantifiable and measurable local participation, optimum utilisation of local goods and services, technology transfer and capacity building.

 

To a large extent, the act was put in place to empower and encourage indigenous companies to fully participate and harvest the yields available to the services in the sector. The act was also enacted to tame youth restiveness by creating job opportunity for them and to reduce capital flight. But unfortunately, it has not prevented the annual capital flight.

 

From government records, $10 billion is lost every year to foreign shipping companies on local supplies reserved for Nigerians. Most government agencies responsible for regulating this sector knows little or nothing about ship chandelling service.

 

Therefore, enforcing the extant laws governing the profession becomes very difficult to accomplish.

This is one of the reasons the local content policy has not yielded much benefits as anticipated by the country.

 

Why have touts suddenly outnumbered the professional chandlers and what is the implication to the economy?

 

The truth is that most government agencies saddled with the responsibility of regulating ship chandelling services in the country do not have clue of what ship chandelling is    all about. So, getting them to enforce the existing laws in the sector is almost an impossible task.

 

Worldwide, there is nowhere in any port or within the territorial water of any country that a non-licensed ship chandler is allowed to make supplies to a ship or a rig/platform as the case may be.

 

Regrettably, contrary to the extant laws, this is happening here in the country’s maritime domain due to lack of enforcement by the appropriate authorities.

 

Often, the multinationals indulge in this kind of malpractices. They hire their sister companies as vendors to provide all offshore procurement and processing the delivery contrary to the law. Also, there are other groups of illegal suppliers called “cow boys.” They are mostly into drug trafficking, gun trade and smuggling, among other illegal activities on Nigerian waters.

 

Unfortunately, the Department of Petroleum Resources (DPR) saddled with the responsibility of issuing permits and regulate operations in the oil and gas sector also encourages foreign companies to indulge in illegalities. Based on DPR permits, some foreign companies are listed and registered as vendors to carry out ship chandlers function without regards to the existing laws.

 

This is against international practice in the maritime industry. While DPR has its powers to issue permit, I think the Department should have ensured that the applicants applying for the permit possess the requisite professional qualification to engage in ship chandelling services.

 

The ship chandlers are licensed by Nigeria Customs Service (NCS) to carry out offshore sustenance deliveries. It is not the responsibility of DPR. At the moment, I believe it is appropriate to define ship chandelling services for the benefit of those that do not know its functions.

 

Ship chandelling services is a trade function engaged in the supply of consumable and non-consumable goods and services to a vessel, rig/platform for maintenance and sustenance of life of crew members while on board the vessel and for the maintenance of the vessel or rig/ platform.

 

The person or corporate bodies licensed to provide these services are universally known as ship chandler. So, what the DPR has done is a violation of the extant law. The multinationals, their related companies, agents or vendors are not qualified to carry out all forms of offshore supplies in the oil and gas upstream sector. As I said earlier, this has been encouraging capital flight and it is not good for our fragile economy.

 

What is your professional body doing to regulate it just like other professions in Nigeria?

 

Worldwide, no person or entity not licensed by the appropriate authority such as Customs can carry out ship chandelling services, which include provisions, bonded stores, deck stores, engine stores, bunkers, lubricants and fresh water, among others. It is against international best practice.

 

Generally, it is the responsibility of our professional body to organise its members to implement related guidance, policies, law and regulations issued by government, submit proposal on professional planning to government departments.

 

In line with the international professional body, which we belong to, other function performed by the body include: to promote communication and cooperation between different industries and enterprises in the country, organise training for members to improve overall qualities/performance and level of operating and management of the profession.

 

We also maintain registration of licensed ship chandlers and formulate professional regulations, practice standards and protect fair completion by enforcing International Ship Suppliers and Service Associations, (ISSA) practice conditions and ethics among members.

 

Besides, we assist government agencies to check the infiltration of quacks into the industry, but government is lagging behind in this regard.

 

We also synchronise a cordial relationship with ship owners, captains and managers and report vessels, ship owners, who are not complying with internation    standards of the practice to government.

 

Here in Nigeria for instance, we have been collaborating with government agencies to monitor and enforce compliance of ship owners, masters, managers and licensed ship chandlers. Irrespective of these efforts, lack of encouragement from government has brought chandelling low in the country when compared with other countries.

 

A number of factors have been ignored and if continued to be ignored, supply services will continue to be at its low ebb. From our research as an association, some of the factors contributing to low participation by indigenous chandlers include none enforcement of the extant laws.

 

For instance, the law, which established ship chandelling service, the Customs and Excise Management Act (CEMA), gave it absolute power as sole supplier of goods and services on board a ship and further empowered by the Nigerian oil and gas industry content development Act 2010.

 

These laws should have guaranteed the profession its place in the Nigerian maritime industry, as practicable globally. Ironically, ship chandelling services lack classification here in our maritime sector as well as in the oil and gas industry.

 

Rather, it is grouped into marine, operations and logistics services, making it free for all service as long as you have DPR permit, which is in contravention of the existing law. Under this broad classification, anyone having DPR permit or shipping/protective agent can render ship chandelling services without regard to the existing laws.

 

Arbitrary charges by terminal operators and difficulties in accessing ships to supply goods within the terminals are another reason why ship chandelling service is weakening.

 

Ridiculous charges and unnecessary access hindrance by the terminal operators is against the principles of Nigerian seaport reform.

 

Further, it is the terminal that is under concession, not the berths, about 10 – 15 meters of the berth or quay apron is a com    mon user facility, maintained by Nigeria Port Authority. Also, terminal operators do not render any service to ship chandlers. These arbitrary charges are against international best practice.

 

(Bill without service). These extra charges increase the cost of supply services, making Nigeria the most expensive country to receive goods and services for the crew members and the vessel.

 

Which agencies of government do you have a synergy with in the industry?

 

We have had meetings with the Ministry of Petroleum Resources, Ministry of Transportation, Nigerian Content Development and Monitoring Board (NCDMB) and Nigerian Customs Service (NCS) in our efforts to lend a helping hand in regulating the industry.

 

Currently, we are participating in an advisory committee in collaboration with NCDMB to address the pending issues in the Nigerian upstream sector and have equally submitted our proposal to the board for implementation.

 

We are looking forward to have dialogue with DPR and National Petroleum Investment Management Services (NAPIMS) to see how the industry can be better regulated.

 

How do you think your sector can contribute to economic development of the country?

 

If the industry is well harnessed, it can generate over $15 billion per annum and create over 15,000 employments opportunities for our youths. In 2006, it was government that estimated that most of the annual budget in Nigerian oil and gas industry was approximately $10 billion and that the money is spent on foreign products and services, which could be sourced here.

 

Before the enactment of the Cabotage Act and Nigeria Oil and Gas Industry Content Development Act 2010, the profession was dominated by foreign companies, ignoring Federal Government Policies.

 

Unless there is full implementation and enforcement of the extant laws concerning the profession, ship chandelling services would not realise its full potentials and government will continue to lose huge revenue to foreigners.

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